In Uncategorized on 09/28/2020 at 16:55

I’ve said it often: whistleblowers are there to connect the dots. However, they need all the help they can get. My colleague Peter Reilly CPA was posting today on LinkedIn concerning the complexities of tax law and how journalists and others looking for a story get it all or partially wrong. Here’s a perfect example of how IRS gets it wrong, and how a pro se whistleblower can’t put it right.

David Shaun Neal, 2020 T. C. Memo. 135, filed 9/28/20, says he blew the whistle on a DADs deal. He was working for the target, and was feeding the information to the RA that he asked for, but it wasn’t on point. IRS says there was an earlier blow on the same target, and they got zip. Dave says that’s because the RA wasn’t looking in the right place; he says he told the RA where to look (outside the hearing of his bosses), but the RA ignored him.

Then Dave filed his Form 211, but he didn’t fill in all the blanks, and omitted important items. The Ogden Sunseteer who got Dave’s 211 saw no need to send it to evaluators because IRS had already identified the issue, and bounced it. But the bounce letter said it “does not contain a determination regarding an award under section 7623(b)”. 2020 T. C. Memo. 135, at p. 7.

Five (count ’em, five) months later, IRS hit target again and collected $13 million. Two months after that, the Ogden Sunseteer sent Dave another bounce, which he petitions.

Administrative record, right? Dave says the RA is lying when RA says Dave told him nothing and only participated in one phoneathon, where Dave said nothing.

Judge David Gustafson holds an evidentiary hearing. Was evidence withheld from the administrative record, as Dave claims?

Well, Judge Gustafson saw the witnesses, and heard Dave’s cross-examination (remember, Dave was pro se). I just read some of it, and I winced. Look at 2020 T. C. Memo. 135, at p. 13.

Judge Gustafson believes the RA.

“First, Agent B credibly denied this allegation. He had no recollection of any meeting with Mr. Neal and, assisted by contemporaneous notes, was able to say only that Mr. Neal participated in one telephone conference call that Agent B had with the target’s officers. Agent B did not recall Mr. Neal’s speaking in that call, and the subject of that call was not relevant to the tax abuse that Mr. Neal alleges. When the opportunity came to cross-examine Agent B on this important point, Mr. Neal’s contention wilted, and the agent’s account went unchallenged. We do not know whether  Mr. Neal’s allegations were a knowing fabrication or were a badly distorted memory, but we believe Agent B. He received no information from Mr. Neal.

“Second, even if we were to credit Mr. Neal’s account, what he actually testified is that Agent B never understood what Mr. Neal was trying to explain. ‘[H]e kind of ignored me, basically. Didn’t take any of my information.’ This is evidence not of information received by the agent but rather of information ignored by him.” 2020- T. C. Memo. 135, at pp. 19-20. (Name omitted).

I make no secret of my respect for Judge Gustafson, but he got it wrong, unless Dave is the world’s worst witness as well as the world’s worst cross-examiner. Does IRS have carte blanche to blow off a whistleblower without listening to him, especially an employee of the target? Or did IRS magically discern from another source what Dave was telling them?

I already admitted I didn’t see the hearing, so I can’t evaluate body language, tone of voice, or facial expressions (and even if I did see and could evaluate, I’m not the judge). Dave’s fold on the cross-examination was probably enough for Judge Gustafson, and maybe would have been enough for me. When a witness “can’t remember,” that’s the time to go all in.

But I’m shaking my head. Any whistleblower who files a Form 211 without counsel, much less goes into an evidentiary hearing, even if they scale the Van Bemmelen obstacle course, is asking to lose.

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